Employees are protected against unilateral termination of their employment by the Termination Protection Act, which, since January 1, 2004, applies to all business units with more than 10 employees. Before January 1, 2004, however, this termination protection applied to business units with more than five employees. Employees whose employment relationship started in a business unit with more than five but less than 10 employees prior to January 1, 2004, keep their protection even if the number of employees does not reach 10. However, in this case, employees hired after January 1, 2004, do not obtain termination protection. Furthermore, the Termination Protection Act applies only to employees who have been employed for at least six months by the same employer.

If these prerequisites are met, an employee can be dismissed with ordinary notice only if the termination is “socially justified.” This means that the employment may be terminated for reasons based only on urgent business requirements, the employee’s conduct, or the employee’s person. There is no “at will” employment rule in Germany.

Urgent Business Requirements

If the termination is based on urgent business requirements, the following preconditions must be met: (i) the employee’s specific job is cancelled; (ii) there is no possibility to employ the employee in another comparable or suitable position within the company; and (iii) the so-called “social selection” was properly made. In this context, “social selection” means to select for redundancy the employee who would be the least severely affected by the termination. The employee’s years of service in the company, age, maintenance obligations and a disability of the employee must all be taken into consideration. In practice, this analysis often leads to the dismissal of the last person hired (i.e., the practice of “last in, first out”). The employer may be able to exclude from the “social selection” some employees if this is justified due to legitimate operating reasons, such as knowledge, skills and performance of a certain employee, or the maintenance of a balanced staff structure.

Employee’s Conduct

A termination for reasons based on the employee’s conduct is justified if the termination can be considered as an appropriate reaction to a breach of contractual duties by the employee. In this context, the interests of the employee and the employer mustbe balanced. A single breach of contractual duties will normally not be sufficient to allow a unilateral termination. The labor courts normally require that the employee has been warned not to repeat the breach of contract. Therefore, it is necessary for the employer to give a formal warning to the employee. However, there are cases where terminations without prior warning have been accepted by the courts, e.g., in case of theft of employer’s property. For reasons of evidence, the formal warning should be in writing.

Employee’s Person

The most common case for a termination based on the employee’s person is a termination due to lengthy or frequent illness.

A termination for lengthy illness is justified if the employee has been ill for a significant period of time and the recovery is not expected in a foreseeable period of time. Furthermore, the process of work must be disrupted considerably by the absence of the employee.

A termination for frequent illness is justified if the employee has been frequently ill in the past and similar illness periods are to be expected in the future. Again, the process of work must be disrupted considerably by the employee’s absence. It is difficult to specify general rules as to how long and how frequent an illness has to be in order to justify a termination.